Loan

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swasti (Querist)
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16 October 2012 A company had acquired a loan of Rs 100 Crores from a bank. Later on the financial position of company worsened and now after years, the loan repayment has been agreed to settle for Rs 60 Crores as full and final payment. Now in the books, since the loan is standing at Rs 100 Cr. What would happen to the balance of Rs 40 Crores. Would it be taxable at full rates treating the same as income? Please guide.

CA Dileep Surya Kumar

CA Dileep Surya Kumar (Expert)
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16 October 2012 Waiver of trading liability is taxable however loan from bank is of capital nature hence not taxable.

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CA MANOJ GUPTA

CA MANOJ GUPTA (Expert)
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16 October 2012 The settled legal position is that waiver of loan taken for purchase of capital assets will not result in any income either under section 28(iv) or under section 41(1) but the same will result in income if the loan is in nature of working capital loan, etc
See Mahindra & Mahindra Ltd. v. CIT (2003) 261 ITR 501 (Bom). Ravinder Singh v. CIT (1994) 205 ITR 353 (Del), CIT v Tosha International Ltd. (2009) 176 Taxman 187 (Del) and CIT v. Chetan Chemicals (P.) Ltd. (2004) 139 Taxman 301 (Guj). For capital account cases
AND Solid Containers Ltd. v. Dy. CIT (2009) 308 ITR 417 (Bom) : (2009) 178 Taxman 192 (Bom) and Rollatainers Ltd. v.Commissioner of Income Tax for working capital cases
CA MANOJ GUPTA
JODHPUR
09828510543

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